CAPSTONE'S CEO ALMGREN TO RETIRE.

Byline: Evan Pondel Staff Writer

CHATSWORTH - Capstone Turbine's chairman and chief executive officer, Ake Almgren, plans to retire - a move announced Monday in conjunction with the manufacturer's United Technologies partnership and a $10 million stock repurchase program.

The maker of environmentally sound power sources also provided third- quarter guidance, expecting to post a per-share loss between 14 cents and 16 cents, with revenues of $3.9 million. Results are due out Thursday.

Although the company has remained relatively quiet for several months, Wall Street lauded the news, with Capstone shares advancing 36 cents, or 48 percent, to close at $1.11 on the Nasdaq market. Analysts said the stock repurchase program, which has already been approved by Capstone's board, evokes some sense of confidence in the company's future.

But the real question is how much longer Capstone's power supply can last. Its stock has lost almost 100 percent of its value in the past two years. And in the second quarter ended June 30, the company reported a net loss of $10.3 million, compared with a loss of $30.8 million in the same period a year ago.

``Right now, we are in a period of low-level capital spending in Capstone's sector,'' said David Kurzman, analyst with H.C. Wainwright & Co. Inc. in New York. ``The cost of electricity just isn't that high at the moment. And that's certainly a concern for Capstone's survival.''

As of now, Capstone has approximately 77.5 million shares of common stock outstanding and about $144 million in the bank. Though considered a leader in microturbine manufacturing, Kurzman said the company is trading below its cash value.

``Is there an economic proposition to drive the stock higher? I'd say no,'' he said.

But there is one potential salvo to Capstone's weakened state.

United Technologies Corp. has committed to purchase a 4.9 percent stake in the company. And while terms of the deal have not been disclosed, UTC is regarded as a formidable player in commercial fuel cells.

``To bring that type of investor into the company is certainly a positive,'' said Steven Colbert, analyst with JMP Securities in San Francisco. ``It gives Capstone a more well-recognized name and a stronger marketing parent.''

UTC is a $28 billion company that provides products to the aerospace and building systems industries. About $3.88 million, or about 14 percent of UTC's sales, stem from the U.S. government. Based in Hartford, Conn., the company reported third-quarter net income of $612 million, compared with $565 million the previous year.

``We believe Capstone microturbines, integrated to work directly with UTC's combined heat and power equipment, will provide significant benefits to our customers,'' said Almgren, 55, who will continue to serve as Capstone's president and chief executive officer until a successor is found. ``Today we have achieved one of my principal goals, that of establishing a strategic partnership with ... United Technologies.''

Another accomplishment of Almgren: taking Capstone public in 2000. After joining the company in May 1998, Almgren headed an aggressive campaign to push for a public listing, Kurzman said. The stock hit the market just below $30 and reached levels as high as $90.

``But fundamentally, the company hasn't sold very much product,'' Kurzman said. ``And they've already gone through several management changes.''

Capstone Turbine Corp. named Karen Clark chief financial officer in January, filling a significant void after the company left behind a fiscal year fraught with imperfections. Most notably, the company was entangled in a web of lawsuits alleging that the firm and underwriters violated federal securities laws during its initial public offering.

Eliot Protsch will fill Almgren's void as Capstone's chairman. The 48- year-old is the president of Interstate Power and Light Co. for Alliant Energy Corp.

Aside from the change in the board's hierarchy, Clark said no layoffs have been announced; she refused to answer other questions.